Public Sector Diffusion

Different public sector entities became involved with solar. Utilities at first, because it seemed it might fit well with their existing operations - though ultimately it didn't. Aid agencies, because it was deemed to be complementary to their missions. Government departments, because it was part of a broader social welfare objective. We will review each of these in turn, and then consider in depth the case of the Indian Government's approach, and its drawbacks.

Given their existing infrastructure of trained technicians, distribution channels and rural offices, national electricity utilities seemed in theory to be the ideal propagators of solar. For example, a US laboratory for renewable energy set up a collaborative venture with electricity utilities in Brazil in the early 1990s for the diffusion of solar. When asked why they chose utilities as their partner for solar, they were clear: utilities knew exactly where the unelec-trified customers were located and had strong networks of technicians strategically placed throughout the state.2

However, in line with the discussion in Chapter 2 about existing industries not wanting to destabilize their own business and not being able to see new opportunities, it soon became clear during the 1990s that utilities found this new emerging solar market quite unappealing. When it came to rural electrification, their knowledge base primarily pertained to grid extension, around which they had established standard, comfortable practices.3 Moreover, at the time, most electric utilities in emerging markets were struggling to make ends meet as it was, without introducing a new business into their mix. They simply did not have the appetite for something as new as selling decentralized solar systems:

PV electrification is . not an activity that plays to the natural strengths of an electricity utility. If it is to be undertaken by the utility, it requires the development of an additional range of skills and capabilities. In the poorer developing countries, where utilities are under-funded, have too few resources, and are incapable of carrying out the basic tasks of repair and maintenance on the existing systems, asking them to take on PV electrification is pointless.4

There were plenty of one-off demonstration programmes by utilities, such as in Sri Lanka as early as 1981,5 or in Brazil, as mentioned above, in 1993.6 There was also the case of Eskom, the South African utility, entering the solar market in 1998 (as we shall see in Chapter 7, this remained at the scale of a demonstration programme as well). But there were very few instances, if any, of utilities adopting the role of long-term, effective propagator of solar in emerging markets.

Even earlier than the utilities, the international aid agencies were engaged in similar one-off demonstration programmes. However, in the early days these projects tended to be managed from afar, with not nearly enough retained capacity or retained learning on the ground:

Turn-key systems were packed into shipping cases, air-freighted and trucked to project 'target groups' in remote areas of the Third World, while Western experts were flown in to complete the installations. So from the late 70s to 80s, many projects 'engineered' to perform maintenance free ... failed because of lack of local involvement. When fuses blew or when rodents chewed through wires, local farmers hundreds of miles from the nearest town wondered where in the world they could find someone who knew enough about this miraculous technology to fix it.7

Such projects demonstrated that without local trained technical support as part of the ongoing market infrastructure for solar, solar diffusion would fail. This was confirmed by another rural energy analyst at the time, who found that while the PV panels in such projects continued to function, without sufficient local technical support, the ancillary equipment frequently failed under the harsh operating conditions.8

Beyond utilities and aid agencies, there were various national-level government departments selling solar directly. But these entities would come to show that government departments generally do not have the capacity nor the incentive to provide the customer with a well-designed, high-quality system, delivered upon order and serviced over the long term. Furthermore, the systems tended to be sold at highly subsidized rates, in line with their public service objectives and the expectations of the citizens. This meant that customers got used to the low subsidized price, and other private-sector players could not compete with the government-subsidized channel. And because these programmes did not run like a business and cover all their costs with some modicum of profit, there was no capacity for growth in diffusion, other than through additional government spending - solar diffusion essentially remained capped at whatever the following year's government budget for solar would be.

A World Bank report on the experiences with solar in various South Pacific islands found that 'in no case have the PV systems performed consistently as intended by the governments or expected by the users'9 and that the programmes were fundamentally dependent on further cash injections from the outside to add new installations (in other words to grow).10 Similarly, in the Philippines (where the potential for solar is enormous, with 7000 islands and a population of 85 million people), the Government decided to do it directly. Using either local cooperatives or local government agencies as vehicles for diffusing highly subsidized solar systems for homes, or centralized solar systems with battery charging (where a home brings their battery for charging to a centralized solar system), the Government managed to diffuse only 133 kilowatts of installed capacity of solar in various applications by 1999.11 Or to put it into perspective, less than 3000 solar systems (of 50 watts) over more than one decade among an unelectrified population of more than 3 million -penetration of a mere 0.1 per cent.12

Because government agencies often took the lead in trying to diffuse solar in the 1980s and early 1990s, it is worth reviewing in a bit more detail why they did not emerge as more effective agents for solar diffusion. To do so, it is illuminating to consider the case of India.

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